Tuesday, September 09, 2014

"German Quality" could mislead as to German origin

AB brews Beck’s Beer, which originated from and was brewed
in Germany from 1873 until 2012 when AB began brewing Beck’s in St. Louis,
Missouri. Plaintiffs, Florida, New York,
and California consumers, bought Beck’s allegedly in reliance on misrepresentations
of Beck’s German origin.

At AB’s invitation, the court examined demonstrative samples
of 12-ounce bottles and cans.The judge
found that the “Product of USA” disclaimer as printed on the actual cans and
bottles themselves was difficult to read. It could be obscured by overhead lighting “because
the disclaimer is printed in a white font against a shiny, metallic silver
background.”However, the “Product of
USA” disclaimer printed on the label appearing on AB’s Alcohol and Tobacco Tax
and Trade Bureau (TTB) certification for Beck’s was visible at any angle: the
words were printed on a gray, matte background. There was thus a “discernable
difference in legibility” between the disclaimer on the actual product and the
disclaimer approved by the TTB. More importantly, the disclaimer was blocked by
the carton.Consumers would have to open
cartons/lift bottles from a six-pack to see it.“A reasonable consumer is not required to open a carton or remove a
product from its outer packaging in order to ascertain whether representations
made on the face of the packaging are misleading” (citing Williams v. Gerber
Prods. Co., 552 F.3d 934, 939 (9th Cir. 2008)).

AB argued that “Brewed under the German Purity Law of 1516” was
true because “German Purity Law has nothing to do with place of production or
source of ingredients. This law simply concerns the type of ingredients used to
brew beer (water, hops, barley, and yeast).”However, plaintiffs alleged that AB violated the German Purity Law
because that law allowed onlybarley, hops and water in beer, and Beck’s contained yeast
and other ingredients and additives. This couldn’t be resolved on a motion to dismiss.More importantly, even if the statement were
true, “a reasonable consumer may not know what compliance with the German
Purity Law means.”A reasonable consumer
could be misled, especially in conjunction with other statements on the carton;
an alleged overall marketing campaing to maintain a German brand identity; and
Beck’s German heritage, including 139 years of being brewed in Germany.

The court also determined that “German Quality” was not mere
puffery as a matter of law, if it contributed to the deceptive context of the packaging
as a whole.

Then, AB argued that it was eligible for safe harbor
protection from consumer claims because the TTB approved the labels. Florida
law provides that FDUTPA does not apply to “[a]n act or practice required or
specifically permitted by federal or state law,” New York has a similar
provision, and California doesn’t expressly have a safe harbor but implies its
existence.A defendant bears the burden
of establishing a safe harbor. While the TTB approved the labels, plaintiffs
alleged that part of the label including “Product of the USA” wasn’t visible at
the time of purchase.Thus, AB didn’t
show entitlement to the safe harbor.

Also, the claims here weren’t based on the labels approved
by the TTB, but rather on representations on cartons and other representations
and omissions. True, there was some overlap between the TTB-approved labels and
the statements on Beck’s cartons, but the fact that the key disclosure on the
TTB-approved labels wasn’t visible until after purchase was important, as was
the ready legibility of the disclaimer on the TTB certificate compared to on
the actual bottles.Plus, the carton
prominently displayed “German Quality,” which was not contained in the TTB
approved labels.

The court then accepted plaintiffs’ price premium theory of
harm, even though AB doesn’t sell directly to consumers and doesn’t set
prices.The complaint that alleged that
consumers were willing to pay, and did pay, a premium for high quality, imported
beer.

The court also declined to dismiss unjust enrichment claims.
While some cases say California doesn’t recognize an independent unjust
enrichment case of action, others do, and unjust enrichment could be an
available theory if plaintiffs lacked a remedy at law; at least pleading in the
alternative was acceptable. The price premium theory also precluded AB’s
argument that plaintiffs received the benefit of their bargain by paying for
and receiving Beck’s.

Then the court found that plaintiffs lacked standing to seek
injunctive relief because they didn’t plead they were likely to buy Beck’s
again if it were appropriately labeled.The
court responded to policy concerns (this precludes an order stopping false
advertising in consumer protection cases) by reasoning that (1) Article III
trumps policy, and (2) it’s possible to plead entitlement to injunctive relief
in consumer protection cases by pleading willingness to buy the product again
if the false advertising stops.

Comment: I don’t really know why such willingness is enough
to count for Article III standing if the threat of future injury has to be “real and immediate—as opposed to a merely
conjectural or hypothetical.” (As the
court even says, “The permissive word ‘may’ seems at odds with Supreme Court
precedent which requires a real and immediate threat of future injury.”)What’s the injury?Not being able to buy Beck’s at an acceptable
price?I think you have to bite the
bullet and say yes, no injunctions in consumer protection cases if you follow
this reasoning.(However, I don’t know
why, having demonstrated standing for damages, a class representative couldn’t
ask for injunctive relief on behalf of the still-deceived members of the class
who do indeed have standing even under this limited interpretation; the court
here said that at least one named plaintiff has to have standing, but I don’t
see why standing for one remedy wouldn’t be enough.) The court would, however, allow an amended
complaint, which could test the theory that plaintiffs could plead that they’d
be willing to buy properly labeled Beck’s (which, by their harm theory, would be
cheaper Beck’s).

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